News

Published: September 4, 2024
Updated: September 4, 2024

India to Develop Climate Finance Taxonomy in 6-10 Months

A Step Towards Sustainable Finance

The Indian government has announced plans to develop a climate finance taxonomy within the next 6-10 months. This move aims to create a set of guidelines that will help investors and institutions direct funds towards investments that support climate change mitigation and adaptation.

The Need for Climate Finance Taxonomy

The Finance Minister, Nirmala Sitharaman, highlighted the importance of climate finance taxonomy during the Union Budget 2024-25. This initiative will increase the availability of capital for climate-related projects and activities.

Collaborative Efforts

Ajay Seth, Secretary, Department of Economic Affairs, emphasized the need for collaborative efforts to develop the taxonomy structure. He invited industry stakeholders to partner with the government under the aegis of the Confederation of Indian Industry (CII).

Financial Inclusion and Credit Rating

Seth also discussed measures to strengthen financial inclusion, including widening the corporate bond market, developing secondary markets, and improving credit rating mechanisms. The government is working on the National Financial Reformation Registry, which will help bridge critical gaps in credit rating.

India's Financial Sector

The market capitalization in India stands at 140% of GDP. However, there is a need to reimagine the financial sector, as only 0.2% of the total capital raised last year was fresh or productive capital. The majority was through the sale of stake by promoters.

The development of a climate finance taxonomy is a significant step towards sustainable finance in India. With collaborative efforts and a focus on financial inclusion, India can create a more robust and resilient financial system that supports climate change mitigation and adaptation.